Blackwater Evading Federal Taxes

We've all heard about the problems that Blackwater is having in Iraq with its security operatives killing innocent Iraqi citizens. Now it looks like the company may have other problems as well.

Rep. Henry Waxman (D-California) says Blackwater may have evaded millions of dollars in federal taxes. He says the company is trying to avoid paying Social Security, Medicare and unemployment taxes by classifying its employees as private contractors, instead of company employees.

This came to light when one of Blackwater's employees complained to the Internal Revenue Service (IRS) about being classified as a private contractor. The IRS ruled that the classification was incorrect, and said the man was an employee and not a private contractor. Blackwater agreed to pay the back taxes for this one employee, but made him sign an agreement saying he would not talk to any "politician or public official".

Waxman got hold of the agreement with a subpoena, and was incensed about the secrecy provision. He said, "The nondisclosure agreement is abhorrent on its face. It is deplorable that a company that depends on federal tax dollars for over 90 percent of its business would even contemplate forbidding an employee to report corporate wrongdoing to Congress and federal law enforcement officials."

Blackwater says they are appealing the IRS ruling. Personally, I think the appeal is just a stalling action. They have little chance of winning the appeal (barring interference from the Bush administration).

Both of the other security companies doing business in Iraq classify their agents as employees, and are paying the appropriate taxes. Private contractors are those who supply their own tools and decide for themselves when they will or won't work. Blackwater agents do not supply their own weapons and ammunition, and they must go to work when Blackwater tells them to. They do NOT meet the definition of a private contractor.

It is estimated that between May 2006 and March 2007, Blackwater has evaded $15.5 million in Social Security and Medicare taxes and $500,000 in unemployment taxes. That is just sickening. If other employers must pay these taxes, then Blackwater should be paying them also.

This is a company that seems to think it can make its own rules. They don't follow the rules of engagement that our soldiers must follow in Iraq, and they don't pay their taxes as other American companies do. For them, Iraq is not a job but a get-rich-quick scheme.

Their government contract should be voided, and they should be forced to pay their back taxes -- with penalties.